How to File LLC Taxes: A Complete Guide for New Business Owners
By default, a single-member LLC is taxed as a sole proprietorship (Schedule C) and a multi-member LLC as a partnership (Form 1065). You'll owe income tax plus 15.3% self-employment tax on profits. Many LLC owners save $5,000–$20,000/year by electing S-Corp status once profits exceed roughly $40,000.
How LLCs Are Taxed by Default
Here's something that confuses almost everyone: the IRS doesn't have a specific tax classification for LLCs. Instead, LLCs choose (or default to) an existing tax structure. This "pass-through" taxation means the LLC itself doesn't pay federal income tax — profits pass through to the owners' personal tax returns.
A single-member LLC defaults to being taxed as a "disregarded entity" (sole proprietorship). A multi-member LLC defaults to partnership taxation. Both can elect to be taxed as a C-Corp or S-Corp instead, but most small LLCs stick with the default or choose S-Corp.
This flexibility is actually one of the biggest advantages of an LLC. You can start with the simpler default taxation and switch to S-Corp later when it makes financial sense.
Single-Member LLC Taxes
As a single-member LLC, you report business income and expenses on Schedule C (Profit or Loss from Business), which attaches to your personal Form 1040. You'll also file Schedule SE to calculate self-employment tax.
Your total tax obligation has two components: income tax (10%–37% depending on your total taxable income) and self-employment tax (15.3% on the first $168,600 of net earnings in 2026, then 2.9% above that). Self-employment tax covers Social Security and Medicare — the equivalent of what an employer would withhold from a paycheck.
For example, if your LLC earns $80,000 in net profit, you'd owe roughly $11,300 in self-employment tax plus income tax based on your total household income and filing status.
Pro Tip
Track every legitimate business expense — they directly reduce both your income tax and self-employment tax. A $1,000 deduction saves you roughly $350–$500 in combined taxes.
Multi-Member LLC Taxes
A multi-member LLC files Form 1065 (U.S. Return of Partnership Income), which is an informational return — the LLC itself doesn't pay tax. The LLC issues each member a Schedule K-1 showing their share of income, deductions, and credits.
Each member then reports their K-1 amounts on their personal tax return and pays income tax and self-employment tax on their share of LLC profits. This is true even if the LLC didn't distribute all profits to members — you're taxed on your allocated share, not just what you received.
The partnership return (Form 1065) is due March 15, one month before individual returns. Late filing carries a penalty of $235 per month, per partner, for up to 12 months. Set a calendar reminder — this deadline sneaks up on many new LLC owners.
S-Corp Election: When It Saves You Money
An LLC can elect to be taxed as an S-Corp by filing Form 2553 with the IRS. The key benefit: S-Corp owners can split income between a "reasonable salary" (subject to employment taxes) and distributions (not subject to self-employment tax).
Here's a simple example: Your LLC earns $120,000 in profit. Without S-Corp election, you'd pay self-employment tax on the full $120,000 (~$17,000). With S-Corp election, you pay yourself a $60,000 salary (employment taxes ~$9,200) and take $60,000 as a distribution (no self-employment tax). Annual savings: ~$7,800.
The general rule of thumb: S-Corp election starts making sense when your LLC profits consistently exceed $40,000–$50,000/year. Below that, the added complexity and payroll costs ($500–$2,000/year for payroll processing) often outweigh the tax savings.
Pro Tip
Form 2553 must be filed by March 15 of the tax year you want the election to take effect (or within 75 days of forming your LLC). Miss this deadline and you'll wait until next year.
Understanding Self-Employment Tax
Self-employment (SE) tax is the single biggest tax surprise for new LLC owners. It's 15.3% on net earnings — that's 12.4% for Social Security (up to the wage base of $168,600 in 2026) plus 2.9% for Medicare (no cap). If your net earnings exceed $200,000 ($250,000 married filing jointly), you'll pay an additional 0.9% Medicare surtax.
The good news: you can deduct half of your SE tax on your personal return as an "above-the-line" deduction. This doesn't reduce the SE tax itself, but it lowers your adjusted gross income, which reduces your income tax.
SE tax is calculated on 92.35% of your net self-employment income (not 100%). This adjustment accounts for the fact that employers pay half of employment taxes for their workers. So on $100,000 of LLC profit, SE tax applies to $92,350.
Quarterly Estimated Tax Payments
If you expect to owe $1,000 or more in taxes for the year, the IRS requires quarterly estimated tax payments. The due dates are April 15, June 15, September 15, and January 15 of the following year.
Calculate your quarterly payment by estimating your annual tax liability (income tax + SE tax) and dividing by four. Use Form 1040-ES and pay online through IRS Direct Pay or EFTPS. Many LLC owners use accounting software like QuickBooks to track income and estimate payments.
Underpayment penalties apply if you don't pay enough throughout the year. The safe harbor: pay at least 100% of last year's tax liability (110% if your AGI exceeds $150,000) through quarterly payments, and you won't owe penalties regardless of this year's actual liability.
Pro Tip
Set aside 25–30% of every LLC payment you receive in a separate savings account for taxes. This prevents the painful surprise of a large tax bill in April.
Common LLC Tax Deductions
LLC owners can deduct ordinary and necessary business expenses, which directly reduces taxable income. Common deductions include: home office ($5/sq ft, up to 300 sq ft = $1,500), vehicle expenses (67¢/mile in 2026 or actual expenses), health insurance premiums (100% deductible for self-employed), and retirement contributions (SEP-IRA up to 25% of net earnings).
Don't overlook: software and subscriptions, professional development and courses, business meals (50% deductible), marketing and advertising, accounting and legal fees, business insurance, and bank fees. These "small" deductions add up quickly.
The Qualified Business Income (QBI) deduction lets eligible LLC owners deduct up to 20% of qualified business income on their personal return. For most service-based businesses, this deduction phases out above $191,950 (single) or $383,900 (married) in 2026.
Important Tax Filing Deadlines
Single-member LLC: Schedule C is due with your personal return on April 15. Extensions (Form 4868) give you until October 15 to file, but any taxes owed are still due April 15.
Multi-member LLC: Form 1065 is due March 15. Extensions (Form 7004) give you until September 15. K-1s must be issued to members by March 15 so they can file their personal returns on time.
S-Corp LLC: Form 1120-S is due March 15 (same as partnership). Extensions are available until September 15. All employment tax deposits and W-2s follow standard employer deadlines.
Ready to form your LLC?
See your exact formation cost across 11 services — state fees, service fees, and add-ons included.
See Your LLC CostsFree, instant results — no email required
Frequently Asked Questions
Does my LLC need to file a tax return if it had no income?
Single-member LLCs with no activity don't need to file Schedule C (though you still file your personal return). Multi-member LLCs should still file Form 1065 even with no income, as failure to file can trigger a $235/month penalty per partner.
Can I do my LLC taxes myself or do I need an accountant?
Single-member LLCs with straightforward income can often handle taxes with software like TurboTax Self-Employed ($80–$120). Multi-member LLCs and S-Corp elections generally benefit from a CPA ($300–$1,500 for annual tax prep) to ensure proper compliance.
When should my LLC elect S-Corp status?
Consider S-Corp election when your LLC consistently earns $40,000–$50,000+ in annual net profit. Below that threshold, the added payroll costs and complexity typically outweigh the self-employment tax savings.
What happens if I miss a quarterly estimated tax payment?
You'll owe an underpayment penalty calculated as interest on the underpaid amount. The penalty rate is set quarterly and is typically 7–8%. Making up the payment as soon as possible minimizes the penalty.